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OPAP's New CEO Aims at New Products

The new CEO of OPAP (OTC: OPAPF), Mr. Basile Neiadas, made a presentation at the Economist Conference that took place in Athens on April 20th, 2005. He elaborated on OPAP's objectives to attract a wider customer base through new games that appeal to a larger audience, such as Bingo-Lotto.

"Our goal is to take full advantage of the opportunities to increase our revenues from our distribution networks, beyond lottery, such as from advertising, ticket sales for cultural or athletic events, as well as from services such as the payment of bills," said Mr. Neiadas.

He continued, "Betting though the Internet, the telephone or digital TV, are not currently allowed in Greece. Therefore, there is today an extensive illegal market that develops through these channels, and our goal is to go after it. In the short term, we will achieve this objective through strategic advertising as well as by inducing the Hellenic Republic to take measures against illegal gaming. In the medium term, we will introduce new attractive games, while in the long term we will ensure our presence in the market of electronic gaming, once these become legal."

Referring to OPAP's prospects in 2005, he mentioned that, "We follow a strategy which aims to increase our revenues on a constant basis, and to maximize shareholder value within a context of social responsibility. Aiming to maintain our leading position in the sector of lottery and gaming in Greece, we will continue to invest in new games and to redesign the existing ones to make them more attractive to our customers."

"The advertising and sponsorships which we provide focus on existing and potential clients. Our goal is to reinforce OPAP's brand dominance, which is widely recognized and has achieved customer loyalty by maintaining a constant presence in the last 40 years in the lottery and gaming markets in Greece."

Mr. Neiadas analyzed OPAP's financial condition and concluded that, "In today's complex and increasingly demanding environment, establishing and maintaining strong relationships has become of utmost importance. As I mentioned, OPAP enjoys a high degree of loyalty in its customer relationships. On a larger scale, this enables us to win the confidence of international investors, who are willing to reward our business model and accept the state in its role of shareholder rather than as an impediment to our development. This has lead OPAP to become the most profitable company in Greece today and achieve the third largest market capitalization on the Athens Exchange."

Mr. Neiadas' presentation at the Economist Forum came at the heels of an upgrade by Citigroup, which rated OPAP's share a "buy" from the previous "hold" and set a target price of E 25 for the share.

New CEO contributes to OPAP's upgrading

In a note published on April 20th, Smith Barney, a division of Citigroup Global Markets, upgraded its recommendation on OPAP, the Greek lottery group, from "hold" to "buy" and raised the target price to E 25.20. OPAP's shares which are listed on the Athens Exchange closed at E 21.02 on Monday, April 25th.

The appointment of the new CEO, Mr. Basile Neiadas, on March 22nd, 2005 was among the key triggers for this upgrade. Mr. Neiadas, 50 years old, has a strong academic and corporate background in the private sector. He is a graduate of the Athens University-School of Economics and holds an MBA with Honors from Boston University. He has a 20-year career in the pharmaceuticals and cosmetic industry and served as General Director of Games Services of the Organizing Committee for the Athens 2004 Olympic Games.

Another trigger for the upgrade was the positive pressures on the management / regulator from the government's interest in selling more of its stake. Indeed, as of May 2005, the Government will be allowed to reduce its stake in OPAP to from 51% to 34%, and according to the analyst this offering may be expected to take place sooner rather than later.

Citigroup expects a strong first quarter 2005 for OPAP, with sales growth of 36%. The rejuvenation of Stihima, one of the main existing games, is a key challenge to the new CEO, along with clearly communicating a business plan with specific financial targets and key decisions on existing and new games.

The report increases the 2006-2007 EPS estimates for OPAP by 18-21% (1.55 E in 2006 and 1.74 E in 2007), capitalizing mainly on the advertising revenues from KINO which will be initiated in 2006. The actual 2004 EPS was 1.29, with an estimate of E 1.40 for 2004.

The report indicates that there could be further upside to the target price of 25.2 E, as Discounted Cash Flow Valuation scenarios suggest a value up to E 30.8 for OPAP, if the monopoly remains.

OPAP has the gaming monopoly in Greece and it organizes betting on sporting events and lottery games. It has a market capitalization of 6.8 billion Euros, the third largest market cap on the Athens Exchange. Consolidated 2004 Revenues were 3,177.2 million Euros (up 39.5% from 2003) with a Net Income Before Taxes of 742.3 million Euros (up 85.1% from 2003).

Provided by Capital Link

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